Withholding tax is applicable to payments made to Non-Residents (Employees, Business Partners, and Overseas agents) and is part of the overall tax structure of Singapore. According to IRAS (Inland Revenue Authority of Singapore), a person has a legal obligation to withhold a percentage of the payment when he makes payments of a specified nature under the Singapore Income Tax Act to a non-resident and pays the withheld amount to IRAS. The amount withheld is known as Withholding Tax.
For tax purposes, IRAS has categorized individuals and companies into two types: Resident and Non-Resident. A Company is considered as Resident if the control and management are in Singapore and any foreign company’s branch office is treated as a Non-Resident because the control and management lies with the foreign company.
Withholding Tax on Payments to Non-Residents on the selected transaction
|Company Director’s Remuneration||22%|
|Technical assistance and services fees||17%|
|Rent on moveable property||15%|
|Charter fees for ship or aircraft||0-2%|
Types of Payment Subject to Withholding Tax
The types of payment that are subject to Withholding Tax are listed under Section 45 of the Singapore Income Tax Act, which includes:
- Payment of commission fees to overseas agents
- Payment of director’s fees to non-resident directors
- Payment of professional fees to offshore accountants.
The following is a list of payments and fees subject to Withholding Tax under Singapore Income Tax Act under Section 45:
Section: 45, 45A, 45B, 45C & 45D
- Interest, Commission, Fee or other payment in connection with any loan or indebtedness
- Royalties or other payments for use of or right to use any movable property
- Management fees and service fees
- Rental from the use of movable properties
- Non-resident director’s remuneration
- Distribution by a Unit trust
- Payment for the purchase of real property from non-resident property trader
- Supplementary Retirement Scheme (SRS) withdrawal made by foreigners and Singapore Permanent Residents
- Professional service fees for non-resident professionals
- Distribution from real estate investment trust (REIT)
- Income derived as public entertainer
- Commission or other payment of junket promoter
Withholding Tax Amount
The amount depends on the type of payment and to whom. The following the percentage of the amount to withhold:
- For management fees, technical and other service fees paid to a non-resident company, the withholding tax rate is the same as the Corporate tax rate, i.e. 17%. For non-resident individuals, the withholding tax is 22% of the gross payment.
- For other types, the withholding tax rate is 10% or 15%.
- Where a double tax agreement is applicable, the rates specified in the respective countries apply.
The reduced rates of 10% or 15% apply to payments made to non-residents which:
- Are not from any kind of trade, business or profession carried in Singapore and
- Is not connected to the permanency of the non-resident in Singapore.
And in any other case apart from the ones mentioned above, the corporate tax rate of 17% would apply.
Accounting of Withholding Tax
It must be accounted for at the earliest of:
- When the payment is due and payable
- When the payment is credited to the non-resident’s payee account or any other designated account
- Date of actual payment
The date of the invoice is taken as the date of payment, in the absence of a contract or agreement. The general meeting in which Director’s fees is declared will be regarded as the date of payment of withholding taxes.
Withholding Tax Deadline
- If the date of payment is prior to 01 July 2012, the filing of form IR37/A/B/C/D and payment of withholding tax must be made to IRAS by the 15th of the following month from the date of payment to the non-resident.
- If the date of payment is from 01 July 2012, the filing of form IR37/A/B/C/D and payment of withholding tax must be made to IRAS by the 15th of the second month from the date of payment to the non-resident.